Correlation Between Central Bank and Union Bank

Can any of the company-specific risk be diversified away by investing in both Central Bank and Union Bank at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Central Bank and Union Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Central Bank of and Union Bank of, you can compare the effects of market volatilities on Central Bank and Union Bank and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Central Bank with a short position of Union Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Bank and Union Bank.

Diversification Opportunities for Central Bank and Union Bank

0.69

Correlation Coefficient

Central Bank  Union Bank

Poor diversification

The 3 months correlation between Central and Union is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Central Bank of and Union Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Bank and Central Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Central Bank of are associated (or correlated) with Union Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Bank has no effect on the direction of Central Bank i.e., Central Bank and Union Bank go up and down completely randomly.

Pair Corralation between Central Bank and Union Bank

Assuming the 90 days trading horizon Central Bank of is expected to under-perform the Union Bank. In addition to that, Central Bank is 1.56 times more volatile than Union Bank of. It trades about 0.0 of its total potential returns per unit of risk. Union Bank of is currently generating about 0.03 per unit of volatility. If you would invest  12,262  in Union Bank of on September 19, 2024 and sell it today you would earn a total of  246.00  from holding Union Bank of or generate 2.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Central Bank of  vs.  Union Bank of

Central Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Central Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Union Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Union Bank of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Union Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Central Bank and Union Bank

The main advantage of trading using opposite Central Bank and Union Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Bank position performs unexpectedly, Union Bank can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Union Bank will offset losses from the drop in Union Bank's long position.

The idea behind Central Bank of and Union Bank of pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.